New disclosure requirements come into play in 2020 for CBCA companies

As of January 1, 2020, new diversity disclosure requirements for public companies incorporated under the Canada Business Corporations Act will be in effect for their annual shareholder meetings.

New disclosure requirements come into play in 2020 for CBCA companies
Matthew Merkley

As of January 1, 2020, new diversity disclosure requirements for public companies incorporated under the Canada Business Corporations Act will be in effect for their annual shareholder meetings.

Changes to the CBCA are “piggybacking off of the requirements already in Form 58-101F1 that the Canadian Securities Administrators introduced a number of years back,” says Matthew Merkley, co-head of Blake, Cassels and Graydon LLP’s corporate governance group in Toronto. Those requirements set out disclosure reporting requirements for women on boards of directors and in senior management positions.

“In addition to women, you will also have to provide the same disclosure about the other further categories that the CBCA is using from the Employment Equity Act: Aboriginal people, persons with disabilities, and visible minorities.”

The changes result from Bill C-25, which amended several acts in addition to the CBCA, receiving royal assent on May 1, 2018. The bill was intended to bring federal legislation in line with Canadian securities laws, TSX rules and international best practices. The key reforms to the existing legislation affected diversity disclosure, as well as majority voting requirements and posting of meeting materials on the internet.

[Read more: Proposed amendments to CBCA focus on diversity disclosure and more]

The new diversity disclosure requirements to be implemented by public companies in 2020 do not cover banks, or public companies that are incorporated under provincial business corporations acts, says Merkley, including those in Ontario, British Columbia and Alberta. Those public companies not incorporated under the CBCA “may voluntarily determine to provide the same disclosure, but they're not obligated.”

Another important change is that the new CBCA disclosure requirements will apply to all public CBCA companies, including “venture issuers” – smaller, venture companies that are listed on junior stock exchanges – that are not currently caught by securities administrators’ disclosure requirements.

Companies captured by the new diversity disclosure reporting requirements “don’t have to necessarily proactively do anything; it’s a comply-or-explain regime,” Merkley adds. “You have to say if you have a diversity policy that covers these [four] categories.”

“If not, you have to say why you don’t have a target. Do you consider these groups when putting forward nominees for election to the board, and if not, why not? So that puts pressure; it doesn’t force anything, it just puts pressure.”

The reporting requirements do not impose quotas, only disclosure. And what this new reporting requirement will mean for affected companies is that “it forces them to think about these issues; … who’s filling these senior management positions?” The requirement places pressure on issuers to think about how they’re going to proactively fill these positions, he says.

The existing requirement for disclosing the number of women on boards and in senior management may have been easier to meet, Merkley suggests, since females make up just over half of the Canadian population. “But these other [identified] groups are smaller.” StatsCan has reported non-Aboriginal visible minorities as numbering in the low twenty-per-cent range, he notes. while Aboriginal persons and those with disabilities would be even less than that.

“If you set targets, then the targets would presumably be smaller numbers than for women,” he says. “We’ll have to see how the issue is treated; we don’t know yet.”

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